Fastnet Oil & Gas plc announced that it has been notified by the Petroleum Affairs Division of the Irish Department of Communications, Energy and Natural Resources that it has been awarded a licensing option of part blocks 49/7, 49/8, 49/9, 49/12 and 49/13 in the North Celtic Sea, offshore Ireland. The Licensing Option commences from 15 November 2012 until 14 May 2014.
The application for the Licensing Option was made jointly by Fastnet, Carob Limited (“CRB”), a consultant to Fastnet, and Petro-Celtex Consultancy Limited (“PCX”), a company established by Paul Griffiths, now Managing Director of Fastnet. The Licensing Option acreage lies in water depths of up to 100 metres in the North Celtic Sea basin. Marathon Oil Corporation (“Marathon”) drilled two wells in the area of the Licensing Option in 1974 (49/13-1) and 1986 (49/13-2).
49/13-1 tested a shallow anticline generated by Tertiary basin inversion that could be identified at the time on the existing poor quality 2D seismic data. The well encountered oil-bearing Purbecko-Wealden sands over a gross interval of 300 feet, stratigraphically equivalent to the hydrocarbon-bearing reservoirs tested in the Barryroe oil field to the southwest. The interval was tested by Marathon but it did not flow oil as the test tool became plugged with sand. Later seismic mapping, based on new 2D seismic acquisition in 1985 by Ardmore Exploration Limited (“Ardmore”), Marathon’s partner in the 49/13-2 well, showed that the well was drilled significantly downdip from the crest of the structure.
Marathon and Ardmore drilled 49/13-2 in 1986 to test a down-faulted Upper Jurassic structural trap analogous to that successfully tested by Gulf Oil in 1983 (49/9-2, Helvick oil discovery). The well encountered oil in the Upper Jurassic over a gross interval of approximately 700 feet. Marathon tested the well but failed to flow any significant amounts of oil due to the low gravity of the oil.
The large vertical extent of the hydrocarbon-bearing sections seen in the above two wells provides encouragement that significant in-place oil resources may exist within the area of the Licensing Option.
Fastnet has agreed a work program for the initial 18 month period of the Licensing Option which is to reprocess and interpret existing 2D seismic data and to undertake desktop studies designed to confirm the quality and gravity of the oil encountered in both wells and to determine potential reservoir deliverabilities.
Subject to results, Fastnet would move to agree a new and expanded work program with the Department to acquire 3D seismic data during an 18 month extension to the Initial Phase in order to better define the size of the traps tested by the wells.
Holders of Licensing Option
Pursuant to a participation and compensation agreement entered into by Fastnet, CRB and PCX prior to submission of the joint-application for the Licensing Option the holders of the Licensing Option are as follows:
The Licensing Option was originally identified by CRB and PCX. Accordingly and pursuant to the terms of the Agreement, Fastnet has agreed to pay to CRB and PCX certain one-off and consultancy fees both in relation to both the making of the joint application and in relation to ongoing technical advisory services.
In addition, Fastnet has granted the following warrants over ordinary shares in the capital of the Company, which shall be exercisable for a period of three years from 9 November 2012 at 17 pence per share:
In addition, Fastnet has granted CRB and PCX a total 15% (7.5% each) carried interest, during the Initial Phase. The value of the carried interest is capped at €30,000 (€15,000 each) for CRB and PCX.
In the event that, by unanimous agreement of Fastnet, CRB and PCX, it is necessary to increase the budget for the Initial Phase beyond the €30,000 cap for CRB and PCX then CRB and PCX may, at their sole discretion pay their proportion of costs or have their interest in the Licensing Option diluted accordingly.
In the event that a well is drilled by the parties to this Licensing Option leading to commercial production of oil, gas and/or condensate, then CRB and PCX shall be awarded a production bonus amounting to the sum of €400,000, being split €200,000 to each of CRB and PCX.
This production bonus shall be paid by Fastnet and/or its successors or assignees after a period of 12 months following the date of first commercial production.
Cathal Friel, Chairman of Fastnet commented: “We are delightedto have strengthened our portfolio of material prospects in Ireland with the award of another Licensing Option offshore Ireland. Early drilling by Marathon confirmed the oil potential of this area of the North Celtic Sea. The application of new 3D seismic acquisition and processing technology is required to further define the extent of the structural traps and the likely size of potential oil resources.”
November 14, 2012